Corporate Governance and a Firm’s Cash Holdings外文原文.pdf

Corporate Governance and a Firm’s Cash Holdings♣ a,* b c Jarrad Harford , Sattar A. Mansi , and William F. Maxwell aSchool of Business, University of Washington, Box 353200, Seattle, WA 98195 bPamplin College of Business, Virginia Tech, 1016 Pamplin Hall, Blacksburg, VA 24061 cEller School of Business, University of Arizona, Box 210108, Tucson, AZ 85721 October 24, 2005 Abstract We examine the relation between the management of cash holdings and a corporate governance index that includes various antitakeover provisions. Using data from the Investor Research Responsibility Center for the period 1993 through 2002, we find that firms with high antitakeover provisions (weak shareholder rights) have smaller cash reserves. Further tests suggest that firms with weak shareholder rights dissipate their cash reserves far more quickly than do managers of firms with strong shareholder rights, primarily through acquisitions. We find some evidence that firms with weak shareholder rights raise more cash from financing activities. We also find differences in the source of the cash from the financing activities based on governance structure. Firms with weak shareholder rights are more likely to issue debt and less likely to issue equity. Our results, which contrast with recent research on the cross-country relation between shareholder rights and cash holdings, help us understand how country level shareholder rights interact with firm-level agency problems and shareholder power. Key Words: Cash holdings, corporate governance, shareholder rights, acquisitions,